After years of teaching and researching markets, I've found that the better skill is knowing when to change your mind.
Change your view too slowly, and you'll miss what the facts are telling you.
Change it too quickly, and every new headline will send you in a different direction.
Today, that idea is used widely in finance. You don't need to understand the maths behind it to use the basic idea.
The thing is simple.
You believed something yesterday. Today you learn something new. Should you keep your old view, or change it? If you should change it, how much?
How the Whole Market Changed Its Mind in 2026
Start with what just happened.
At the start of 2026, almost everyone expected US interest rates to fall. People mainly disagreed on how many rate cuts there would be. A few months later, expectations had changed. Markets were now considering the possibility of rate hikes, while the Federal Reserve kept rates unchanged.
Start with your best current estimate, then adjust it as evidence arrives, not clinging to the old view, not throwing it away at the first headline, but weighing the two together.
The market did this in public, in real time, over six months.
The Trap of Ignoring the Base Rate
I see this with students all the time.
They spend days researching a company, then one bad news report comes out, and they change their view completely. That report matters, but it is only one piece of information. It has to be considered along with everything they already know about the company.
The same thing happens with “stock tips.”
A friend says a stock is going to double, and suddenly it feels like a great opportunity. Before changing your view, think about all the stock tips you've heard in the past. How many actually worked? If the answer is only a few, one more tip is not enough to change your mind.
There's an opposite trap too.
Once we settle on a view, we tend to notice only the evidence that agrees with it and wave away the rest. In finance, that one has a name, called confirmation bias.
Hold Your Beliefs in Grayscale
One way to avoid this mistake is to stop thinking in certainties.
Philip Tetlock spent many years studying people who make accurate predictions.
Looking at thousands of forecasts, he found that the best forecasters rarely think in terms of absolute yes or no.
They work with probabilities and adjust them as new information comes in. A 65% chance might become 60%, then 70%, depending on the evidence.
It is better to hold strong opinions loosely than loose opinions strongly.
Most people do the opposite. They build a loose opinion on thin, incomplete information, then hold on to it with full conviction.
Instead of saying, “Interest rates will fall,” you might say, “I think there's a 70% chance they will fall.” If new information appears, you adjust that number instead of throwing away your entire view.
Prediction markets work in much the same way. They keep updating the odds as fresh information becomes available.
I encourage my students to think like this when valuing a company. A target price is an estimate, not a guarantee. As new quarterly results come in, that estimate should change too.
More Data, More Confidence, More Wrong
Markets can fall into the same trap.
A strategy that has worked for months starts to feel safe. Every successful trade makes investors more confident. But the risk may be growing even while nothing seems wrong.
This is overconfidence bias, one of the most studied and most expensive traps in all of finance.
A long winning streak doesn't guarantee the next day will be the same. Sometimes it ends without much warning.
Whenever new information comes in, ask yourself two questions:
- Does this change my view?
- Is there something I'm missing because everything has gone well so far?
Keep updating your view as the evidence changes. Just don't assume that more evidence always means you're safer or more certain.
Start Here
Start keeping a prediction logbook. It is the single habit I recommend most to students who want to think clearly.
When the outcome arrives, complete that third column, but don't stop at “right” or “wrong.” If you were right, ask the harder question: was I right for the reason I wrote down, or did it work out for a completely different reason? Being right by luck and mistaking it for skill is exactly how overconfidence grows.
Do this for a few months, and something useful appears.
You stop wondering whether you're a good forecaster and start seeing it in your own handwriting — your reasons, your outcomes, and every time the world proved you right for entirely the wrong reason.
Invest in yourself,
Aswini Bajaj